Question

What do u mena by working capital? How is it calculated???


explain factor affecting of working capital requirements.??
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Answer 1

hey!!

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Answer:-

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Working capital is total capital which is need to faces day to day expenses. like buy goods from the market.

calculate by formula:-

Working Capital = Current Assets – Current Liabilities

Factors affecting working capital requirement are:-

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1.Nature of Business:-

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• In a manufacturing business raw materials need to be converted into finished goods.which increases the expenditure on raw material, labour and other expenses.

2.Scale of Operation:-

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• Some firms which operating on a higher scale of manufacturing is required generally high.Such organisation required large amount of working capital as compared to the organisations.

3. Production Cycle :-

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• Production cycle is the time period between the of raw materials and their conversion into finished goods by using machines labour etc.

Answer 2

Answer: Net liquid assets computed by deducting current liabilities from current assets.The amount of available working capital is a measure of a firm's ability to meet its short-term obligations. In the normal trade cycle of a company, working capital equals working assets.

how it is calculated:

the net working capital formula is calculated by subtracting the current liabilities from the current assets. Here is what the basic equation looks like. Typical current assets that are included in the net working capital calculation are cash, accounts receivable, inventory, and short-term investments.

factors affects working capital are:

1)Length of operating cycle

2)Nature of business

3)scale of operation

4)business cycle fluctuation

5)seasonal factors .........